Skip to main content

Business Accounting Financial Accounting: The Impact on Decision Makers

1. To calculate: Operating activity section of the cash flow statement. Introduction: A cash flow statement is prepared by the business entity so as to know the flow of cash during the period. Activities under the cash flow statement are classified into three categories: Cash flow from operating activities Cash flow from investing activities Cash flows from financing activities Net Cash provided by operating activity is $202.1 To compute cash flows from operating activities: Cash flow Statement Operating activities Particulars Amount ($) Net Income Add: Liabilities associated with assets held for sale 215.5 Short term debt 43.1 Unearned revenue 29.2 Current portion of long term debt 15 Other current liabilities 7.1 309.9 Less: Accrued payroll 24.8 Accrued income taxes 16.5 Accounts payable 63.4 Other accrued taxes 3.1 107.8 Net cash provided by operating activity (309.9 - 107.8) 202.1 2. To explain: Items not included in the operating activity section of the cash flow statement. Introduction: A cash flow statement is prepared by the business entity so as to know the flow of cash during the period. Activities under the cash flow statement are classified into three categories: Cash flow from operating activities Cash flow from investing activities Cash flows from financing activities Sometimes current liabilities appear in financial section of cash flow statement if not directly related to operating activities. Most current liabilities are directly related to the firm’s ongoing operations, therefore the change in the balance of each current liability account should be reflected in the operating activity category of the cash flow statement. If a current liability is not directly related to operating activities, it should not appear in the operating activity category. For example, if the company uses notes payable or accounts payable as a means of financing, it must be reflected in financing activities rather than operating activities. This is the reason a large increase in short-term borrowing does not appear in the operating activity portion of the cash flow statement.

1. To calculate: Operating activity section of the cash flow statement. Introduction: A cash flow statement is prepared by the business entity so as to know the flow of cash during the period. Activities under the cash flow statement are classified into three categories: Cash flow from operating activities Cash flow from investing activities Cash flows from financing activities Net Cash provided by operating activity is $202.1 To compute cash flows from operating activities: Cash flow Statement Operating activities Particulars Amount ($) Net Income Add: Liabilities associated with assets held for sale 215.5 Short term debt 43.1 Unearned revenue 29.2 Current portion of long term debt 15 Other current liabilities 7.1 309.9 Less: Accrued payroll 24.8 Accrued income taxes 16.5 Accounts payable 63.4 Other accrued taxes 3.1 107.8 Net cash provided by operating activity (309.9 - 107.8) 202.1 2. To explain: Items not included in the operating activity section of the cash flow statement. Introduction: A cash flow statement is prepared by the business entity so as to know the flow of cash during the period. Activities under the cash flow statement are classified into three categories: Cash flow from operating activities Cash flow from investing activities Cash flows from financing activities Sometimes current liabilities appear in financial section of cash flow statement if not directly related to operating activities. Most current liabilities are directly related to the firm’s ongoing operations, therefore the change in the balance of each current liability account should be reflected in the operating activity category of the cash flow statement. If a current liability is not directly related to operating activities, it should not appear in the operating activity category. For example, if the company uses notes payable or accounts payable as a means of financing, it must be reflected in financing activities rather than operating activities. This is the reason a large increase in short-term borrowing does not appear in the operating activity portion of the cash flow statement.

Solution Summary: The author explains that a cash flow statement is prepared by the business entity so as to know the flow of cash during the period.

Financial Accounting: The Impact on Decision Makers

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN: 9781305654174

Author: Gary A. Porter, Curtis L. Norton

Publisher: Cengage Learning

See similar textbooks

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

Blurred answer

Chapter 9, Problem 9.2AP

Chapter 9, Problem 9.4AP

Chapter 9 Solutions

Financial Accounting: The Impact on Decision Makers

Ch. 9 - Current Liabilities The following items are...Ch. 9 - Transaction Analysis Pollys Cards $ Gifts Shop had...Ch. 9 - Current Liabilities and Ratios Several accounts...Ch. 9 - Prob. 9.19E Ch. 9 - Prob. 9.9MCP Ch. 9 - Prob. 9.3AP

Knowledge Booster

Background pattern image

Similar questions

Recommended textbooks for you

Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:9781285595047
Author:Weil
Publisher:Cengage
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,

Text book image

Financial Accounting: The Impact on Decision Make...

Accounting

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Cengage Learning

Text book image

Financial Accounting

Accounting

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Cengage Learning

Text book image

Managerial Accounting

Accounting

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:South-Western College Pub

Text book image

Financial Accounting Intro Concepts Meth/Uses

Finance

ISBN:9781285595047

Author:Weil

Publisher:Cengage

Text book image

Cornerstones of Financial Accounting

Accounting

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Cengage Learning

Text book image

Financial And Managerial Accounting

Accounting

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:Cengage Learning,

SEE MORE TEXTBOOKS